Held for Sale

6 Months Ended

Sep. 30, 2021

Discontinued Operations and Disposal Groups [Abstract]

Assets and liabilities to be disposed of by sale (“disposal groups”) are reclassified into “held for sale” if their carrying amounts are principally expected to be recovered through a sale transaction rather than through continuing use. The reclassification occurs when the disposal group is available for immediate sale and the sale is probable. These criteria are generally met when an agreement to sell exists, or management has committed to a plan to sell the assets within one year. Disposal groups are measured at the lower of carrying amount or fair value less costs to sell and long-lived assets included within the disposal group are not depreciated or amortized. The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less cost to sell is reported as an adjustment to the carrying value of the disposal group. Assets and liabilities that have met the classification of held for sale were $3.1 billion and $2.3 billion, respectively, at September 30, 2021 and $12 million and $9 million, respectively, at March 31, 2021. The Company determined that the disposal groups classified as held for sale do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation.

European Divestiture Activities

On July 5, 2021, the Company entered into an agreement to sell certain of its businesses in the European Union (“E.U.”) located in France, Italy, Ireland, Portugal, Belgium, and Slovenia, along with its German headquarters and wound-care business, part of a shared services center in Lithuania, and its ownership stake in a joint venture in the Netherlands (“E.U. disposal group”) to the PHOENIX Group for a purchase price of €1.2 billion (or, approximately $1.4 billion) adjusted for certain items, including cash, net debt and working capital adjustments, and reduced by the value of the noncontrolling interest held by minority shareholders of McKesson Europe AG (“McKesson Europe”) at the transaction closing date. The transaction is anticipated to close within the next twelve months, pursuant to the satisfaction of customary closing conditions, including receipt of regulatory approvals, as applicable. As of September 30, 2021, the E.U. disposal group, consisting of $3.1 billion of assets and $2.3 billion of liabilities primarily within the Company’s International segment, was classified as “Assets held for sale” and “Liabilities held for sale” in the Condensed Consolidated Balance Sheet.

During the three and six months ended September 30, 2021, the Company recorded charges totaling $491 million to remeasure the E.U. disposal group to the lower of its carrying value or fair value less costs to sell. These charges also included impairments of individual assets, such as certain internal-use software that will not be utilized in the future, prior to adjusting the E.U. disposal group as a whole. The remeasurement adjustment includes a $226 million loss related to the accumulated other comprehensive income balances associated with the E.U. disposal group. The charges were recorded within “Selling, distribution, general, and administrative expenses” in the Condensed Consolidated Statements of Operations. The Company’s measurement of the fair value of the E.U. disposal group was based on the total consideration expected to be received by the Company as outlined in the transaction agreement. Certain components of the total consideration included fair value measurements that fall within Level 3 of the fair value hierarchy.

The total assets and liabilities of the E.U. disposal group that have met the classification of held for sale in the Company’s Condensed Consolidated Balance Sheets are as follows:


(In millions)	September 30, 2021
Assets
Current assets
Receivables, net	$	1,298
Inventories, net	886
Prepaid expenses and other	113
Property, plant, and equipment, net	301
Operating lease right-of-use assets	224
Intangible assets, net	279
Other non-current assets	348
Remeasurement of assets of businesses held for sale to fair value less cost to sell (1)	(370)
Total assets held for sale	$	3,079

Liabilities
Current liabilities
Drafts and accounts payable	$	1,398
Current portion of long-term debt	4
Current portion of operating lease liabilities	34
Other accrued liabilities	449
Long-term debt	15
Long-term deferred tax liabilities	48
Long-term operating lease liabilities	198
Other non-current liabilities	184
Total liabilities held for sale	$	2,330

(1)Excludes charges related to the impairment of individual assets, which are primarily comprised of a $113 million impairment of internally developed software recorded directly against the gross value of the assets impacted.

On November 1, 2021, the Company announced an agreement to sell its retail and distribution businesses in the United Kingdom (“U.K. disposal group”) to Aurelius Elephant Limited for purchase consideration of £325 million (or, approximately $438 million). The transaction is anticipated to close during the fourth quarter of 2022, pursuant to the satisfaction of customary closing conditions, including receipt of regulatory approvals. Beginning in the third quarter of 2022, the U.K. disposal group will be reflected in the Company’s condensed consolidated financial statements as held for sale and will be remeasured to the lower of its carrying amount or fair value less costs to sell, which the Company estimates will result in a charge of between $700 million and $900 million, primarily related to the inclusion of the accumulated other comprehensive income balances into the carrying amount of the U.K. disposal group. While this range reflects the Company’s best estimate as of the date of this Quarterly Report on Form 10-Q, actual charges could differ based on operating results, changes in foreign exchange rates, and other factors prior to closing of the transaction.